Japan reacts to Mt. Gox crash: Bitcoin tax and handling bans proposed

Japanese government to discuss the idea of Bitcoin regulation in a drive to protect consumer interests.

In the wake of the Mt. Gox closure the Japanese cabinet will discuss their stance on Bitcoin this week with a view to imposing taxes and trading restrictions.

Reports are circulating that an technology panel has been hearing from consultants and officials from the Consumer Affairs Agency, The Financial Services Agency (FSA) and the National Police Authority about the Mt. Gox disaster as they seek to crackdown on Bitcoin trading.

Panel head Takuya Hirai was quoted as saying, "We haven't yet thoroughly grasped the situation, but some kind of regulation is needed from the perspective of consumer protection, and we will also discuss (Bitcoin) from the perspective of imposing asset tax."

Sources also indicate that the government will seek to redefine the cryptocurrency as a commodity, stopping securities firms and banks from handling Bitcoin as part of their main business activities.

How the Japanese propose to impose taxation is as yet unclear. Bitcoin thrives on the anonymous nature of peer-to-peer transacting, outside of centralised control.

The announcement has spurred some comment to suggest that the knee-jerk reaction from the Japanese government may have an adverse effect. Karl-Friedrich Lenz, a professor at Tokyo’s Aoyama Gakuin University warns in his blog that, "If banks and securities firms can’t handle Bitcoins, Japanese consumers will be stuck with illegal shadow banks like Mt. Gox, and their risk will be much higher as a result". Lenz goes on to point out that, "This is the equivalent of a ban in 1994 for banks to set up an Internet homepage. If such a policy is enacted, it will be a great symbol for Japan missing the greatest innovation since the Internet."

Indeed if Japan go it alone they stand to lose out to other sovereign governments more accepting of Bitcoin. In the UK for instance plans to add VAT to Bitcoin transactions have been abandoned according to a report at the Financial Times.

Meanwhile Bitcoin remains healthy, at the time of writing the average price sits at the $670 mark (around £400).